The course weblog for PA5113, State and Local Public Finance, at University of Minnesota

Tuesday, March 31, 2009

Congestion Pricing: I-394 to Central London

This video provides an overview of the MnPASS system, an innovative congestion pricing system in place along I-394. MnPASS provides drivers with the choice to pay a toll in order to access the HOV (high occupancy vehicle) lanes that run along I-394 – those lanes commonly thought of as the ‘carpool lanes.’ The system is unique in that the toll is dynamic, and changes with regards to traffic levels in order to ensure the HOV lanes maintain an average speed of at least 50 mph.

In 2007, Humphrey Senior Fellow Lee Munnich participated in a forum on congestion pricing; video from a Q&A session after Munnich’s presentation on MnPASS suggests MnPASS may be among the cutting edge of congestion pricing systems worldwide.

Many of the questions contrasted the MnPASS system with other congestion pricing systems around the world. While MnPASS is currently limited to one highway that connects downtown to the western suburbs, many larger cities like London, Singapore, Stockholm and Rome have implemented congestion taxes on vehicles that enter the city core during peak hours. Munnich made several comments about London in particular, noting that the intention of the London fee is to force residents to reconsider their reliance on cars. This may be feasible in London, as it is home to a robust public transit system. Munnich noted that up to 80% of commuters destinations within London are available via public transit. Has the London fee begun to accomplish its goals?

The Central London Congestion Charge is an £8 toll on most vehicles entering downtown London at peak times, and is enforced by photographing license plates of cars using existing CCTV cameras. The fee-zone increased to include a larger portion of West London in 2007. Reaction to the fee, and the results of the fee indicate some success, with several issues.

A report by Transport for London, the agency that enforces the fee, indicates that up to 30% fewer cars are entering the fee-zone during enforcement times, and that bike, pedestrian, and transit appears to be replacing car traffic. Congestion initially decreased, though new road projects in London, with some aimed at making London more pedestrian friendly, appear to have increased congestion back to pre-2003 levels. Additionally, voters decided to abolish the expansion of the fee-zone to West London.

These mixed results have forced the Mayor of London, Boris Johnson, to reconsider the fee. One alternative he is considering is using dynamic pricing rather than fixed pricing, so like MnPASS, the fee will change depending on the time of day and traffic levels. Boris has cited Stockholm, Sweden as a model, where dynamic pricing has been in effect since 2006 and congestion has been reduced by about 25%.

The relative successes of MnPASS and Stockholm, and the re-evaluation of static pricing in London suggest that dynamic congestion pricing could be a viable tax in the future, both reducing congestion and providing an additional revenue stream for state and national governments.